TMI Blog1985 (6) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee sold three out of four businesses for a consideration of Rs. 8,59,371.41, while retaining his limber business. The assessee claimed exemption from tax under rule 9(g) of the Kerala General Sales Tax Rules, contending that what had been sold were the separate businesses carried on by a common certificate of registration under his sole proprietorship and that the sales were as a running concern and the purchasers had taken over all the assets and liabilities of the concern as on the date of sale. The Sales Tax Officer overruled this objection. The Deputy Commissioner (Appeals) however upheld the objection and on further appeal the Tribunal confirmed the view taken by the Deputy Commissioner. In this revision filed under section 41 of the Kerala General Sales Tax Act, 1963 (the Act) read with rule 41 of the Kerala General Sales Tax Rules, 1963 (the Rules) the following question of law arises for determination: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding, that the assessee is entitled to exemption under rule 9(g) of the Kerala General Sales Tax Rules in view of the decision rendered in T.R.C. No. 121 of 1977 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be entitled to claim that the sale price of stationery shop should not be included in the turnover was the main question raised in that revision. It was contended before the Division Bench that rule 9(1)(g) operated to exclude the turnover of such sale of business in case the business was sold as a whole, but that benefit was not given to the assessee on the assumption that since the assessee had, besides the stationery business, another business, that of jewellery, and that too had not been sold, she would not be entitled to the deduction. The Division Bench in the reference order observed as follows: "Prima facie we see reason to uphold such an approach, but attention has been drawn to the decision of this Court in T.R.C. No. 121 of 1977. That decision has relied on a Madras case which is reported in Tools and Machineries Ltd. v. State of Madras [1956] 7 STC 740. We notice that the facts of the Madras case are different in that the business there was not sold as a whole and it was not a case of the assessee having two different businesses. Since the question has been considered earlier by a Division Bench and we doubt the correctness of that decision it is appropriate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are inclined to think that there must be a complete cessation of business activity, either by a complete divestiture of the stock-in-trade or a complete transfer or cessation of the business as a whole. Neither of these contingencies has happened here. Despite the transfer of the bell metal business, the assessee continued to be in business and was pursuing his business activities in arecanuts. In the circumstances, we are unable to hold that there was a sale of the assessee's business as a whole." The decision of the Madras High Court in Tools and Machineries Ltd. v. State of Madras [1956] 7 STC 740 was cited to support this conclusion reached by the Division Bench. As already stated, as rightly pointed out by the Division Bench in the reference order in T.R.C. No. 47 of 1983, the facts of the two cases are not comparable. In one case, the sale was the whole of one of the two distinct businesses carried on by the assessee, while in the Madras case (Tools and Machineries Ltd. v. State of Madras [1956] 7 STC 740) the sale was of stock-in-trade, retaining the rest of the business. The view taken by the Madras High Court that there was no sale of the business as a whole was perfec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. It was held that the stock-in-trade transferred to the firm formed the assessee's capital in the firm, and that such transfer could not be treated as sale of goods. It was also observed that even assuming that there was a sale, it was not a sale in the course of trade or business; nor was it a transaction by a dealer as defined in the Act. 9.. The facts of none of the cases cited, except in T.R.C. No. 121 of 1977, are exactly similar to those in the case on hand. The sale in 39 STC 317 (State of Tamil Nadu v. Thermo Electrics) was only a portion of one of the two branches of business carried on by the assessee; and that was almost the case in 7 STC 740 (Tools and Machineries Ltd. v. State of Madras) also. The sale in 39 STC 325 (Deputy Commissioner (C.T.) v. Behanan Thomas) was that of a branch of the business, while the transfer in 20 STC 470 (C. M. Hamsa Haji v. Sales Tax Officer was that of the closing stock of the assessee's business to a firm, of which he (the assessee) himself was a partner, to share it with the other partner of the firm, treating it as his capital investment in the firm. The finding of the Tribunal in T.R.C. No. 47 of 1983 was that there was no sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness. When a business is sold as a going concern, the buyer might in his turn, sell the goods in the course of his business, and such sale would be exigible to tax; if at the time of the sale of the business as a whole and also at the later stage when the buyer from the assessee sells the goods, tax is levied or collected, the effect would be that the goods are being subjected to double taxation. The Legislature presumably wanted to avoid such an anomaly and be fair and reasonable. 12.. The amendment, introducing explanation 3(d) to clause (xxi) of section 2 of the Act by the Kerala Finance Act, 1984 has not altered the position. The explanation reads as follows: "Explanation (3D).-Unless otherwise expressly provided in this Act, any transfer, delivery or supply of any goods referred to in this clause shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and purchase of those goods by the person to whom such transfer, delivery or supply is made." The amendment came into force on 1st April, 1984, i.e., with no retrospective effect. That apart, even when such delivery supply or transfer is made and is deemed to be a sale, it is ope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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